The decision to change the tax regime is expected to cost the charity sector about £60m a year
Organisations carrying out alterations to listed buildings will have longer to complete their construction before they have to meet a new, more stringent VAT regime, according to HM Revenue & Customs.
The decision to change VAT for alterations to listed buildings from zero rate to standard rate was announced in this year’s Budget and is expected to cost the charity sector about £60m a year in tax, although some charities might be able to recoup this after the government promised more funding to help cover VAT costs for listed places of worship.
HMRC originally said that charities would have until March 2013 to carry out construction work, but in its summary of responses to changes to "borderline anomalies" in the VAT system, it has changed this to September 2015. It has also agreed a more generous definition of whether work has started, which says that it is not necessary to have signed a binding contract but simply to have carried out at least 10 per cent of the work.
Peter Jenkins, VAT adviser to the Charity Tax Group, said the measures did not go as far as the group had hoped. "We had asked for a relief for buildings used for charitable purposes," he said. "But there’s no movement from HMRC, which seems determined to push this through."He said the Finance Bill would pass its report stage next week, when the CTG would again lobby for changes to exempt charities from the bill’s effects.